Dear Mister Condo,
J.L. from South Carolina writes:
I’m president of an 8-unit condo with no reserve. Current dues to each owner are $175, total, $1,400 monthly. By the time we pay all the routine bills and management $260/monthly, we are left w/ no money to do anything. I’ve tried to increase dues, but management tells me we need to follow the consumer price index and according to the numbers we can only raise the fees $8 more per month. Therefore, to save money – I suggested to the association that we should get rid of management and try to self-manage the property. Again, w/ no success. My question is… how true and accurate is the price index? Your thoughts on self-managing an 8-unit condominium building?
Mister Condo replies:
Thanks for reaching out. Many community associations use a version of the Consumer Price Index (CPI) to determine fair common fees with regards to the “routine” items. However, that strategy practically assures that “Special Assessments” will always be needed for projects, even routine maintenance. Governing documents like these are not uncommon and are often used to attract buyers to a property as it appears to guarantee that common fees will be kept low. It simply doesn’t address the reality of how an HOA runs and funds itself over the long haul. You live in an association that has decided it will simply assess the current owners any time a major expense is needed. A bad practice, but perfectly legal and accepted in most states.As for the self-managed option, it is viable but may not be popular. It will not very likely allow you to “save” any money as your common fees are linked to actual expenses and the CPI. The decision to self-manage should not be made lightly. Yes, it costs the association money to have a professional manager but, at the same time, it doesn’t pit neighbor against neighbor in matters such as delinquency or rules enforcement. That can get quite uncomfortable in a small association such as yours. All the best!